Not as rosy as it seems

Finweek English Edition - - Marketplace Simon Says -

On the sur­face As­cendis Health’s re­sults look re­ally good, with rev­enue up 64% on the back of three ac­qui­si­tions and nor­malised HEPS up 29% (nor­malised as the com­pany strips out the cost of the ac­qui­si­tions). But dig­ging deeper, one can see that things look less rosy, with or­ganic rev­enue growth only 3%. Af­ter in­fla­tion, which was likely 5% to 8%, rev­enue growth is ac­tu­ally neg­a­tive. Like-for­like work­ing cap­i­tal in­creased by some 13%, sug­gest­ing in­creased stock hold­ings in the orig­i­nal core busi­ness be­fore ac­qui­si­tions. Con­sid­er­ing that its prod­ucts should be fairly re­silient to eco­nomic con­di­tions, that is a bad growth num­ber and, cou­pled with re­tail­ers Clicks and Dis-Chem re­port­ing real sales growth, sug­gests all is not well with the core busi­ness. As As­cendis is trad­ing at around 2 000c and a price-to-earn­ings (P/E) ra­tio of 23 times, the value is fair ex­cept for the con­cerns above. I would not be com­fort­able if I was hold­ing the share.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.